China new bank loans nearly triple in May as Beijing steps up policy support

New bank lending in China jumped far more than expected in May and broader credit growth also quickened, as policymakers try to reverse a sharp, Covid-induced economic slump.

Chinese banks extended 1.89 trillion yuan (S$389.7 billion) in new yuan loans in May, nearly tripling April’s tally and handily beating expectations, data released by the People’s Bank of China on Friday.

Analysts polled by Reuters had predicted new yuan loans would surge to 1.3 trillion yuan in May from 645.4 billion yuan in April and against 1.5 trillion yuan a year earlier.

Household loans, including mortgages, rose to 288.8 billion yuan in May, after contracting 217 billion yuan in April, while corporate loans soared to 1.53 trillion yuan in May from 578.4 billion yuan in April.

Chinese policymakers have stepped up support for the slowing economy as Shanghai and other cities ease Covid-19 lockdowns following a drop in new infections.

The cabinet announced a package of policy steps last month, including broader tax credit rebates and postponing social security payments and loan repayments to support businesses.

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Local media also reported last month that financial authorities had told commercial banks to speed up lending.

In May, the central bank cut its benchmark reference rate for mortgages by an unexpectedly wide margin, its second reduction this year, in a bid to turn around the contracting housing market, a key economic growth driver.

But analysts say both banks and potential borrowers remain cautious in case there are further virus disruptions.

After discovering a handful of new cases, China’s commercial hub of Shanghai will lock down millions of people for mass Covid-19 testing this weekend - just 10 days after lifting a gruelling two-month lockdown - unsettling residents and raising concerns about the business impact.

Premier Li Keqiang has vowed to achieve positive economic growth in the second quarter, although many private sector economists have pencilled in a contraction.

China will increase the credit quota for policy banks by 800 billion yuan for them to support infrastructure construction, state television CCTV quoted a cabinet meeting as saying.

Broad M2 money supply grew 11.1 per cent from a year earlier, central bank data showed, above estimates of 10.4 per cent forecast in the Reuters poll. M2 grew 10.5 per cent in April from a year ago.

Outstanding yuan loans grew 11.0 per cent in May from a year earlier compared with 10.9 per cent growth in April. Analysts had expected 10.7 per cent growth.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 10.5 per cent in May from 10.2% in April.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In May, TSF jumped to 2.79 trillion yuan from 910.2 billion yuan in April. Analysts polled by Reuters had expected May TSF of 2.02 trillion yuan. REUTERS